Category: Policy Updates

Roche Take-Over of InterMune A “Rebuke” to FDA

The Wall Street Journal editorial board has an interesting take on Roche’s takeover of InterMune, calling it a “rebuke” of the FDA:

Amid this summer’s M&A fever, Roche’s agreement Monday to buy the San Francisco biotech InterMune ITMN -0.05% deserves special notice. The tie-up is an $8.3 billion guided missile into the fortified bunker that is the Food and Drug Administration.

InterMune has never turned a profit in 16 years of existence and other than its clinical expertise the company holds a single asset: an idea for treating a lethal lung disorder called idiopathic pulmonary fibrosis with no known cause, cure or approved therapy — at least in the U.S. An InterMune drug called pirfenidone that slows the progression of irreversible lung scarring is on the market in Europe, Japan, Canada and even China.

Federal Medicare, Medicaid, Obamacare Subsidies to Increase 85 Percent in Ten Years

On Wednesday, the Congressional Budget Office (CBO) released its Update to the Budget and Economic Outlook: 2014 to 2024

Annual net outlays for the government’s major health care programs (Medicare, Medicaid, the Children’s Health Insurance Program, and subsidies for health insurance purchased through exchanges) are projected to rise by more than 85 percent. Outlays for those programs would grow from 4.9 percent of GDP to 5.9 percent, CBO anticipates.

Spending for Medicare’s payments to physicians is constrained by a rate-setting system called the sustainable growth rate. If the system is allowed to operate as currently structured, the fees that physicians receive for their services will be reduced by about 24 percent in April 2015…If, instead, lawmakers overrode those scheduled reductions — as they have every year since 2003 — spending on Medicare would be greater than the amounts projected in CBO’s baseline. For example, holding payment rates through 2024 at current levels would raise outlays for Medicare (net of premiums paid by beneficiaries) by $131 billion (or about two percent) between 2015 and 2024.

HSA Update: Assets in Health Savings Accounts Almost $23 Billion in June

Key findings from the Midyear Devenir HSA Research Report:

  • HSA assets almost reach $23 billion. HSA accounts rose to 11.8 million, holding assets totaling over $22.8 billion, a year over year increase of 26% for HSA assets and 29% for accounts for the period of June 30th, 2013 to June 30th, 2014.
  • Health plans drive growth. In the first half of 2014, health plans were the leading driver of new account growth, accounting for 31% of new accounts.
  • Continued strong stock market bolsters HSA investments. HSA investment assets almost reached an estimated $2.9 billion in June, up 45% year over year. The average investment account holder has a $12,473 average total balance (deposit and investment account).
  • Investors show solid returns. Investors achieved a 10.6% return on a 5 year basis.

HSA-Assets-6-30-14

Thanks, Suckers

HHS is crowing about how much money has been returned to consumers due to the Medical Loss Ratio (MLR) rules.

The Hill reports –

Insurance companies returned about $ 9 billion dollars from premiums since 2011 because of an Obamacare provision to cap how much profit they can make, according to a new Department of Health and Human Services (HHS) report released Thursday.

Actually the MLR thingy was always a con. First, this regulation had never been tried anywhere. A couple of states tried it with lower ratios but without success. There was absolutely no evidence it was either a good idea or would work without big unintended consequences.

One of those consequences is obvious. Insurers are free to overcharge people, collect the money, earn interest on it during the course of a year, and rebate the overcharge 18 months later. So consumers in effect are simply giving the insurers an interest free loan for a year. That is why there has been $9 billion in rebates. This is not a good thing. Consumers unwillingly loaned insurers $9 billion for a year and got nothing in return.

Federal Courts Zig and Zag on Obamacare Tax Credits

index1Obamacare opponents’ hearts rose this morning, as a three-judge panel of the DC Circuit Court of Appeals struck down the power of federal Obamacare exchanges to pay out tax credits to health insurers who sign up beneficiaries for subsidized Obamacare coverage. Because most states declined to set up their own Obamacare health insurance exchanges, subsidies to insurers would have come to a screaming halt in most of the country. Opponents have long hoped that such a decision would force the Administration back to the negotiating table with Congress.

However, merely a couple of hours later, the 4th Circuit Court of Appeals in Richmond, VA upheld the Administration’s position: That federal exchanges have the same powers as state exchanges to pay out subsidies to health insurers. The Administration plans to appeal the DC panel’s decision to the entire DC Circuit, en banc (i.e. all eleven judges).

Why Does the FDA Only Act (or Overreact) After a Crisis? The 2012 Meningitis Outbreak

The FDA has just issued regulations and policy positions on compounding pharmacies that sell their products across state lines. A compounding pharmacy is a pharmacy that practices like most pharmacies did until well into the 20th century: Pharmacists actually compound chemicals into a medicine, rather than dispensing a pill or vial made by a manufacturer. That is why the mortar and pestle is the traditional symbol of pharmacy. Traditionally, the Food and Drug Administration did not scrutinize these pharmacies. In 2012, the New England Compounding Center was responsible for sending impure steroid injections to twenty states, which caused an outbreak of fungal meningitis that infected 751 people and killed 64. Congress reacted by passing amendments to the Drugs Quality and Security Act in November 2013, giving the FDA the power to regulate compounding pharmacies.

The question nobody asked was: Is this necessary? There was no general crisis of quality in compounding pharmacies. Authorities in Massachusetts shut down two pharmacies and investigated three more. The New England Compounding Center went bankrupt in December 2012.

The Whac-A-Mole Pharmacy Regulation

seniors-and-prescriptionsIt seems you can whack one bad pharmacy regulation down and it pops right up somewhere else. Earlier this year the Centers for Medicare and Medicaid Services issued a proposed rule that would have effectively banned preferred pharmacy networks in Medicare drug plans. Preferred networks are a common strategy drug plans use to negotiate lower prices with drugstores competing to be included in the exclusive network. Seniors who patronize the preferred network pharmacies when filling prescriptions are generally rewarded with lower cost-sharing — sometimes copays as low as $0! Who wouldn’t love that?

Well, apparently the losing pharmacies don’t like that deal. These are the pharmacies who couldn’t offer the lowest prices when competing to be included in the preferred network. Those who can’t (or won’t) compete are cut off from the taxpayer-funded trough since most seniors like lower copays!

Uncharted Territory: Seattle Votes to Reduce Health Insurance Coverage for Low-Income Workers

Well, that is not how headlines reported Seattle’s raising the minimum wage to $15 per hour:

The City Council here went where no big-city lawmakers have gone before on Monday, raising the local minimum wage to $15 an hour, more than double the federal minimum, and pushing Seattle to the forefront of urban efforts to address income inequality.

“Even before the Great Recession a lot of us have started to have doubt and concern about the basic economic promise that underpins economic life in the United States,” said Sally J. Clark, a Council member. “Today Seattle answers that challenge,” she added. “We go into uncharted, unevaluated territory.” (NYT)

I suppose the politicians who voted for this job-killing law will soon amend it to introduce loopholes and exemptions. Nevertheless, employers must react to this huge cost of doing business. It takes until 2021 for the new minimum to kick in for small businesses, and tips will be excluded. I can think of three effects:

Colorado Patients Win the “Right to Try” New Medicines Before the FDA Approves Them

Earlier this month, Colorado governor John Hickenlooper signed the nation’s first “right to try” law. The law allows a patient suffering from a disease, for which no medicine has been approved by the FDA, to try an experimental new medicine before the FDA approves it. The law allows, but does not force, drug-makers to provide their experimental drugs to patients. Other states, such as Louisiana and Missouri, are set to follow.

These patients are in dire straits. They suffer from diseases for which there is no other cure, and have short life expectancies. Most of us cannot imagine being in their position: They are willing to take far greater risks than most would accept, in their search for a cure.

Although the Food and Drug Administration (FDA) has an exemption for “compassionate use”, that exemption requires jumping through too many bureaucratic hoops to be useful. So, scholars at the Goldwater Institute developed the idea of state “right to try” laws that would enable residents to use experimental new drugs without FDA approval.

Latest IRS Rule Outlaws Decades-Old Benefits, But Will Not Stop Employers Dumping Workers into ObamaCare’s Broken Exchanges

The New York Times‘ Robert Pear has covered an IRS rule that he interprets as barring employers from dumping workers into ObamaCare health insurance exchanges. Although this is the goal of the IRS rule, it is unlikely to have a significant effect on employers’ executing such changes.

Pear’s article covers a Q&A just released by the IRS that summarizes a decision it made back in September (Notice 2013-54). That notice laid down rules for Health Reimbursement Accounts (HRAs), Flexible Spending Accounts (FSAs), and Employer Payment Plans (EPPs). Employers have made pre-tax contributions to these plans for many years.

The notice clarifies that HRAs and FSAs must be “integrated” with employers’ group health plans to count towards ObamaCare’s minimum essential coverage. EPPs are a little known method for employers to contribute non-taxable dollars to workers’ premiums for individual insurance, and were defined by the IRS way back in 1961. Unfortunately, I can find no estimate of how many workers have such arrangements, although one expert source suggests they are “not as common” as HRAs and FSAs. My contacts confirm that benefits advisors have also proposed to employers that they fund HRAs and FSAs for workers, as long as those workers have individual policies. The contributions don’t necessarily fund premiums directly, but the money is considered fungible by workers who pay premiums out of their wages.